Earned value (ev)

Definition

Earned value (EV) is a project management technique that measures the performance of a project by comparing the planned progress with the actual progress. It helps in assessing how much work has been completed in terms of the budget allocated, thus providing insights into the efficiency and effectiveness of project execution. EV is essential for tracking overall project health, helping to identify variances in both schedule and costs.

5 Must Know Facts For Your Next Test

1. Earned value helps in determining whether a project is ahead or behind schedule by comparing EV with Planned Value (PV).
2. The calculation of earned value involves determining the percentage of work completed and multiplying it by the total budget for that work.
3. Using earned value allows project managers to forecast future performance based on current data, aiding in decision-making.
4. Earned value can help identify problems early, as discrepancies between EV and actual progress can signal potential overruns or delays.
5. Integrating earned value into project reporting can improve communication with stakeholders, providing a clearer picture of project status.

Review Questions

• How does earned value (EV) help project managers assess the efficiency of their projects?
  • Earned value (EV) allows project managers to compare what was planned versus what has actually been accomplished, providing a clear metric of efficiency. By measuring how much work has been completed in relation to the budgeted amount, managers can quickly identify whether a project is progressing as expected or if there are delays or cost overruns. This comparison not only highlights current performance but also enables informed forecasting for future progress.
• Discuss the relationship between earned value (EV), Planned Value (PV), and Actual Cost (AC) in monitoring project performance.
  • The relationship between earned value (EV), Planned Value (PV), and Actual Cost (AC) is crucial for effective project monitoring. EV provides insight into how much value has been generated from the work performed, while PV indicates what was expected to be completed at that point. When combined with AC, which shows what has actually been spent, these metrics allow for the calculation of key performance indicators like Cost Performance Index (CPI) and Schedule Performance Index (SPI), giving a comprehensive view of project health.
• Evaluate how earned value (EV) can enhance stakeholder communication regarding project status.
  • Earned value (EV) enhances stakeholder communication by providing concrete data that reflects both progress and performance against budget and schedule. Instead of vague updates, stakeholders receive clear metrics that show how much work has been completed compared to what was planned, as well as how costs are aligning with expectations. This level of detail fosters transparency, builds trust, and supports better decision-making by highlighting areas needing attention before they escalate into larger issues.

Related terms

Planned Value (PV): Planned Value (PV) is the budgeted amount for the work scheduled to be completed by a specific time in a project.

Actual Cost (AC): Actual Cost (AC) refers to the total expenses incurred for the work performed on a project up to a specific point in time.

Cost Performance Index (CPI): Cost Performance Index (CPI) is a measure of cost efficiency, calculated by dividing earned value (EV) by actual cost (AC), indicating how well the project is staying within budget.